Kerrville State Hospital is on a hill overlooking the Guadalupe River in Kerrville, Texas. Around 1900 a dude ranch named My Ranch occupied this site. In 1915, 1,000 acres were sold to a group of San Antonio investors, who converted the ranch into the Mountain Park Sanatorium for patients with tuberculosis. In 1917 Dr. Sam E. Thompson purchased the property and operated his famed Thompson Sanatorium there until 1936, when it was acquired by the state of Texas for $80,000. The previous year the Forty-fourth Texas Legislature had appropriated $200,000 for the establishment of a tuberculosis hospital for black patients.

On June 1, 1937, the facility opened as the Kerrville State Sanatorium for Negroes; it was under the direction of Dr. H. V. Swayze. In 1949 the sanatorium was closed and all of its patients transferred to the East Texas State Tuberculosis Hospital in Tyler. The facility was reopened by the state in May 1951 as a branch of the San Antonio State Hospital, serving 119 geriatric women with mental illness. On September 1, 1952, it became a separate entity, known as Kerrville State Home.

By 1959 the hospital had grown to serve 1,200 resident patients; it had buildings located on 41 acres with an adjacent 258 acres that included a small lake. That same year the Texas legislature changed the name to Kerrville State Hospital. As the census at the hospital grew to more than 1,550 patients, the Fifty-eighth legislature appropriated funds to establish a Legion Annex as a branch of the Kerrville State Hospital. The annex, formerly operated as the Legion State Tuberculosis Hospital in buildings leased from the United States Veterans Administration Hospital at Legion, was remodeled to serve mentally ill patients.

It opened in 1964. In 1965 the Kerrville State Hospital census was 1,556, with 374 of these patients housed at the annex. By the early 1970s the hospital had begun changing its emphasis from providing custodial-type institutional care to instead providing individualized psychosocial treatment with an emphasis on the return of patients to the community. Kerrville State Hospital continues to provide facilities that meet standards of the Joint Commission on Accreditation of Healthcare Organizations and Medicare certification. In 1994 the patients moved from the thirteen individual residential buildings located across the campus to the new three-story, 200-bed Luther W. Ross Building; the new structure was named in honor of the Kerrville State Hospital superintendent from 1953 through 1992.

A major renovation and an addition were made to the psychiatric medical unit in 1991; this unit has a thirty-three-bed capacity. Patients could also reside in a psychosocial-rehabilitation living unit on campus. In 1994 the Kerrville State Hospital campus consisted of fifty-three buildings, thirty-nine of which were directly related to patient care. They included a central kitchen, a rehabilitation building (with a woodshop, an arts and crafts clinic, and an auditorium), a physical therapy building, and a psychosocial-classroom building. In 1994 Kerrville State Hospital was one of eight hospitals in the Texas Department of Mental Health and Mental Retardation system. It served a sixteen-county area and had an approximate capacity of 350 beds to treat individuals aged eighteen and over. The Community Services Division of Kerrville State Hospital had eight clinics spread throughout its service area. These clinics provided early treatment intervention to prevent the need for hospitalization, as well as comprehensive follow-up for clients returning to the community after hospital treatment.